Globus Medical Inc (GMED) September 2026 Conference Transcript

All right, good afternoon. My name is Ross Osborne. I'm on the MedTech team here at Wells Fargo. We are joined by the management team of Globus Medical. With us is Keith Feil, President and CEO, as well as Brian Kearns, Corporate and IR. So let's start at a high level. How would you characterize the current hospital capital spending environment? Has customers' willingness to invest in enabling technologies changed over the past 12 months? And where do you see it going?

I think, first off, thanks for inviting us here. We're thrilled to be here today. It's been a great day. Capital environment, from a hospital perspective, to me, seems fairly stable. And I think there's been ebbs and flows from quarter to quarter. But overall, I don't see a, I say, marked change in how hospitals have a desire to acquire capital. You know, as I think about our business, I think our pipeline is there. I think our pipeline is being worked. It's, you know, the thing I spoke about on our last earnings call was really pushing and changing kind of the ways hospitals acquire capital. but I wouldn't say that there's been a hesitation on hospitals spending capital dollars.

Great. And then 340B has come up a couple times this week. Any initial thoughts on hospitals, budgets being impacted?

I mean, at this point, as it relates specific to capital, I don't really have a view of the budgets changing, but I think that that really speaks to more importantly why we need to remain flexible on how capital gets out there, because ultimately we want to make sure that we're putting capital into the hospitals.

And then how about spine procedures? Just looking at volumes broadly, how they've trended since the Q2, any thoughts on the second half of this year?

So as we think about, we've come off three really strong quarters. We had a 10% growth Q3, Q4. I'm sorry, Q4, Q1, and then 7% and Q2. So you know we're coming up on tougher comps in the back half of the year. As I think about our overall guide, we feel comfortable with where we're at. No specific comments, though, as it relates specifically to spine procedures.

What about the market broadly? You guys have obviously performed above market, but are you seeing any softness throughout the summer months as we enter fall.

I mean, to me, some typical softness in the summer months, but nothing that I would say calls into question how it looks versus previous years. I think the spine market has performed pretty well over the last several years. I think we've performed better than market, but as I look at our spine business, we're extremely confident with where we're at.

Great. And then as you guys chat with investors about enabling technology, is there anything that's misunderstood at this point, or do you feel like people understand the benefits?

I think people understand our enabling tech. I would say that one of the questions that comes up is as we've seen lumpiness and how our enabling tech has performed from a revenue perspective, there's been questions on the overall scope of that relative to the size of Globus. I remind everyone that enabling tech is about 5% of consolidated sales. So it's not a gigantic piece, but it's a very important piece. And as we think about enabling tech and where we're going, we really want to focus more on what I would call the razor, razor blade approach to drive the implant pull through and replenishment sale, replenishment sale from implants, from service revenue, from things like disposables. Because our goal here is to place the capital into the hospital and then drive that pull And to do that, we need to make sure that we're launching successful programs. It's not just about, hey, making it very easy for a hospital to get the capital. It's about getting it there and then launching the program, which means that surgeons are properly trained and the staff are properly trained. And really what we ask of our surgeon partners and their staff is that they take the time to work through a robotic case to learn how everything comes together because ultimately if they invest the time up front it becomes better for them as they move forward. And then secondly as you think about enabling tech also as you think about our robots been in the market about nine years now. We still feel that we have a best in class piece of capital but the thing that we're also focused on is as our surgeon champions have moved from the facility that they may have started at that brought the Globus robot, we want to make sure that those facilities have another spine surgeon in there that is embracing other robots. So there's a lot more time being spent on what I would call program development on the back end because the more successful programs that you have out there, to me, number one, it drives that implant pull-through and it drives all the pull-through revenue you're looking to generate. But then secondly, to me, it creates a better case for selling another robot. What I'm looking to do at a facility is have the spine surgeons fight over the robot or have a cranial surgeons also be looking to do some cranial cases. And I want to create that internal competition to generate then the second robot sale.

Great. And then, you know, at this point, how often are you recurring pushback on your robots? You've always been on market for a while. You know, in the case where it's maybe a tougher sell, what is the pushback?

I wouldn't say it's, I wouldn't call it necessarily pushback. I would call it as more competitors have entered the space, I think there's more of a requirement from the hospitals to say, okay, surgeon A, you need to go back and look at all the alternatives that are out there. And to me, what that's caused is an elongation of the pipeline. So to me, it takes longer to close a deal, irrespective of whether you sell it, rent it, lease it, the deals still take a long time to close. And that's been something that we've noticed over the last 12, 18 months.

Okay.

Brian, anything you'd add to that?

That's pretty much it.

And then you recently acquired Higgs Boston Health. What does that team bring to Globus? And would you elaborate on their goal of getting to 95% good outcomes at 10 years?

So as you think about Higgs-Boson, we announced that roughly two weeks ago. In the grand scheme of things, it's an immaterial deal, but we view it as an important deal. I spoke in a last earnings call about stepping up our R&D investment. Higgs-Boson brings really software engineering talent to the business. As you think about Globus and what we've talked about getting to 95% outcomes, if you think about where spine is today, I would say best spine procedure is ACDF, one level, two level. Ten-year outcomes, there was a study done in the late 90s from Hillbrand. It called out that it was about 70% favorable outcome after 10 years. There's been additional studies that have occurred since then related to IDE trials that really corroborated that assertion. you know, what we want to do is aspirationally, we want to get to 95%. And how does Sigmund Pilsen help us do that really starts on the front end. We want to do a better job identifying patients and helping surgeons do a better job with patient selection. So as we think about someone who has a back injury, if they're a candidate for back surgery, we want to understand more about them, their age, their demographic, smoker, non-smoker, what are their comorbidities? Because we want to do a better job matching the patient with the surgical procedure so we think about all of the learnings we've had from all of our cases and all of our data. We want to be able to take that patient and match it with the right procedure that then brings together our enabling tech and then lastly our implants and instruments because we want to basically be part of that journey. I've talked a good bit on the last several earnings calls and even in some of my prepared remarks in our press release about creating a closed loop ecosystem. That closed loop ecosystem, to me, the very front end is where Higgs Boson comes in.

Got it. And then we alluded to this earlier, but I believe the second quarter was your fifth consecutive quarter of above market U.S. spine growth. You know, what's driving that at this point? Is it new product cycle, more head count, or is it taking share?

It's a little bit of everything. You know, as we spoke historically, competitive recruiting, implant pull through, and new products are really the key drivers. But if I dig into that a little bit further, we've had success bringing competitive reps into the business. That's nothing new. It's something that Globus has done for the last several years. We continue to do that. But when I think about specific products, like what are some of the memorable products that are really driving some of this growth? Our line of power tools, our DuraPro drills is something that's being well-received by the market. We continually see more and more uptake. We've increased manufacturing capacity of both hand pieces as well as the disposable kits that go along with them. That's been a really great product for us. Think about our expandable cages. Sable is a cage that still continues to outperform our expectations, and we still see more and more uptake of that where the customer is switching from an older technology or a competitor's technology and going after Sable, which drives higher ASP than maybe some of our other expandables, but also represents share gains as we take business away from competition. Procedurally, XLift procedure is still a procedure that is very strong in our overall portfolio so that the message here is that our growth in the spine is broad-based if I step back from spine and look at some of our other businesses our trauma business is really to me coming into its own I would say at this point I would say we have a full bag I'm very excited about where our trauma business is headed and as I think about the growth in that trauma portfolio it's not just the legacy globus trauma portfolio but it's also the growing raw technology that we acquired or merged with when we when we brought Nevasiv on.

Great. And then within the Spine platform, you know, where are you in the sweet spot of their launches? Are there any new products that need to be refreshed?

So a couple things I'll say that we don't really talk about new products coming. I think what I would say to you is after a period of several years of M&A and also organic growth, right now I feel like we're a business that's pregnant with new products. We just have to get them to market. So there's a lot of projects going on back at the home office as well as our San Diego facility of getting new spine launches out as well as trauma launches. One of the things, one of the products that I'm excited about is our recently announced script spacers. They were 510K approved a couple months ago. We're going to launch that later this quarter. That really brings us into the patient-specific implant business. And we feel that we are differentiated here. We're bringing to market seven devices, spacers, as well as rods. We're going to be able to pair those with our existing implant portfolio. Number one. Number two are these implants, patient-specific implants, can be used with all of our technology, meaning they could be put in with our robot, with Hub, or not. So there's a lot of flexibility there. And these implants also bring the surgeon front and center to help design the case. These implants also will be able to use our expandable technology. So as they're placed, they'll be able to be brought in at a low angle, low height, and then raise. So all of the legacy Globus technology as it relates to expandables will be included there. From a procurement perspective, the surgeon will work to design the implants. That file will then be sent to us and we will manufacture that over, give or take, seven to ten days. That will then ship to the facility and then the procedure can occur.

Okay. And then maybe on enabling tech, you know, you said it's only 5% of total revenue, but still an important part of the company. Would you walk through the transition to more flexible models, how that's going, how you see it evolving this year next?

Yeah, at the end of the day, our goal is to place capital or to get capital, whether it's an outright sale with an upfront rev rec and, you know, 30-day terms or something that's over a longer term of a lease or a short-term rental. You know, from the standpoint of doing that, the point that we want to drive here is we want to remain flexible with the account and we want to be easy to work with. Historically, we've been focused on driving the sale, driving the sale, driving the sale. And what we've seen is that it's really slowed down the ability or the strategy of getting the capital into place because there's been such a focus on that upfront revenue. When to me, we're missing the boat on what's really going to drive what's going to drive differentiation. To me, differentiation is going to be getting the capital into the account, launching a successful program, and then reaping the benefits on the back end of making sure that the capital is being utilized and driving that pull through for us. So in terms of that transition, you know, our sales team is approaching it like they always have, except that there's now more tools in their bag for us to push for the customer to be able to choose if they so wish.

Great. And when can we expect a stabilization in the growth rate of ET? I realize it's a small mix of the total revenue, which is in terms of the growth rate.

I think you're going through a transition phase here in 26. I think as you get into 27, probably still a little bit of that transition in early 27, but I would expect that to normalize as you get more into the mid and back half of next year.

And given the switch of flexible model, like a low single-digit growth rate longer term makes sense for that?

I don't know that I would call it a specific growth rate for enabling tech in and of itself. The way I want to characterize Globus is a mid to high single-digit grower over the long term. You know, as we maybe slow down on some of the enabling tech business, the goal here is, again, to drive the musculoskeletal growth through the implants. So you might see a shift between musculoskeletal enabling tech, but overall, we still want to be a mid-to-high single-digit grower over the long term. And does that shift occur in 27? I think you're going to start to see some of that shift happen in 27. But, again, if I think about some of the deals that were out there actively working, some hospitals prefer to just buy them outright. Right. So you're still going to see sales happening, which is that I would expect over time the mix to really more gradually shift towards lease or other alternative financing models.

Makes sense. And then you discussed the competitive landscape growing earlier in our conversation. You know, with that, are you seeing any pricing or bundling pressure in competitive capital deals?

You know, there's more competition out there, but I wouldn't say that I'm coming at this day to day with with price challenges. We're going to operate competitively no matter where we're at because we don't want to lose a deal necessarily when we look at our competition. But as I think about all the competitors out there, I view kind of one competitor as the one that I'm faced with the most. And really what I want to make sure that we're doing is remaining flexible because I think a lot of our competitors have the ability to switch out from an outright sale to more of a placement approach or a volume-based approach. I want to make sure that we're being able to respond to market and making sure that, more importantly, we're having strategic discussions about the capital versus it being kind of a one-time sale where it's, okay, I want to get that capital in and then forget about it. I want, you know, as you sell in, I want the sale to be more of a partnership between our robotic and our implant sales force because it's, again, launching that successful program.

And then how are you feeling about your sales force in terms of headcount? I want to keep it growing.

As we think about our approach, our approaches remain the same. We want hunters versus gatherers. Our comp models are very variable in nature because we want people to drive growth. I mentioned earlier we have a lot of new products coming. We want to continue to expand our territories. And as we seek to drive competitive recruiting, we want to bring in those competitive recruits that want to knock down doors and really grow their share.

And then, again, a smaller piece of the business, but International Spines put up some great numbers. Where are you guys geographically, and do you have plans to add on more countries?

So we're in approximately 60 to 65 countries. If I think geographically, EMEA is our largest market, but Japan is our largest individual country in the Asia-Pacific. But as I think about where our growth has come more recently, I've seen growth, good growth in Spain and Italy and Portugal in the EMEA markets. Asia-Pacific growth has been a little bit more broad-based, and when I think about LATAM, it's heavily focused in Brazil and Colombia, as where we've seen that growth. You know, our approach is to go deeper in the countries that we're operating in. We're not necessarily looking to add more countries. We want to be able to go deeper and really continue to improve service levels in the countries that we're operating in.

And then I think last week you received CD mark for Celsius?

For E3D.

Yes, 3D. What's the game plan there?

Game plan there is to start rolling those out internationally. There's been, you know, as I think about some of the spine sales shows, Eurospine as an example, there's been a lot of excitement about bringing that onto the market. You know, our view is as quickly as possible to get quotes out there and start selling it and really working to package deals with our robot as well as imaging system. So we're excited about that. It was an important milestone for us.

And is it going to be a broad-based rollout internationally?

It'll be focused because, you know, the rolling out of the imaging system is a little bit different than the robot with just the ability of getting it there physically and getting it set up. But we'll take a, I would say, crawl, walk, run approach because we want to make sure the launches that we do are launched successfully because we want to drive that repeat business.

And then on ASCs, what's your mix now for U.S. Spine?

I would say that our mix is small relative to our overall spine business. I would say in terms of actual percentages, a little over 10%.

Yeah.

Yeah. Not, not a whole lot more. Do I see, well, actually the second part of your question is, is it, are we seeing more gravitation towards the ASC? Yeah. I think that you're seeing that in, in, in places for sure. But I also think they have to be cognizant of the complexity of spine cases. The more complex spine cases to me still remain in the hospital, multi-level pediatric deformity, things like that. I think you'll still see those occurring in the hospital. Our ability to continue to grow into the ASC market is there. I think we have the in-plan portfolio as well as the technology options to do so.

And then maybe walk through your biologics business, what your attach rate looks like and what you can do to increase it.

We haven't really talked a ton about biologics attachment rates. What I would say is from my perspective, it's an opportunity. We manufacture our own biologics and that's something that we're continuing, it's consistent with Globus. That's something I see us continuing to do. And the goal is to really improve your biologics attachment rate. I think that if you look across our business territory to territory, I think there's some territories that could do better than others, quite frankly. We're spending the time to build up our manufacturing base to make sure that as we push to drive more biologics in our business, that we're able to respond with the product.

What are the headwinds and tailwinds at the touch of the rate?

Headwinds and tailwinds really is focused. say you know as I think about many times if I think about contracting the contracting process you may be on contract for implants but you might not be on contract for biologics there's been a focused effort territory by territory to see where those holes are and figure out when the next RFP is happening for biologics to make sure that we can get our products on contract okay great maybe switching gears to Nevro latest and greatest integration there where the largest opportunities to improve the growth profile the normal mob business? Yeah. So, Navro, we are a little year, about a year passed from the deal. We've taken a business that was give or take 400 million and lost about 100 million and really have turned it into a viable business from a top and bottom line. We called that when we acquired the business that we expected some sales disruption. That sales disruption didn't occur right away. It happened actually in Q1. And really the drivers of that, we instituted a lot of cost containment and actions in that business, in fixed costs, as well as some of the variable spend. What we sought to do with the sales force specifically was to adopt an approach that was more consistent with our legacy Globus team, where the comp model is much more variable in nature. That created some disruption, which some folks didn't believe. We spent the last, I would say, quarter, quarter and a half on backfilling those roles. I think I commented on my earnings call, last earnings call, that we filled about 75% of those roles. As I think about where we're at in 2026, what I'm looking to see as we get into the fourth quarter is improvements in our trial volumes sequentially. So as we get into 2027, you start to see the revenue growth. Trials are a great leading indicator of future revenue. That's where the focus is right now on the existing business as it stands.

And then just low-hanging fruit on the synergies with Nebra?

I think we've taken significant cost actions, I think, at this point. where my focus is because, I mean, the last quarter we were, what, a 2022 or a 23 EBITDA for Nevro standalone. So we've really turned that business around, I think, fairly quickly. I'm not specifically calling out a synergy target. I feel that we've achieved a lot of that. The focus right now is on growing top line.

Okay, great. And then in August you received approval for a next-gen HFX Dynam system. When should we expect the system to be available? What are the differentiating factors there?

So we're expecting that to come in 2020, 2027. I believe the launch will be finalized at some point then going into 27. Do you want to talk a little bit about some of the features?

Of which one?

Of the new product from Nebro.

Well, there's several things. There's that base technology, but just to take a quick step back, the whole concept of what they do that's different is a high-frequency technology versus low. So it's clinically demonstrated in a level one study to be superior to low frequency stem. It can be used in a number of different ways as we're launching next year, but it can also be used in a number of other applications like deep brain stimulation, peripheral nerve stem, and several other areas. So this is an area where you could have closed loop technology. you could have a number of different angles that has historically been more focused on the low frequency. In most cases, to deal with paresthesia and other side effects that patients don't like with high frequency, that's not even an issue. So it's not something you generally need to do. So being able to turn off options, turn on options as patients might personally require is a very good option to have. So it's also a much smaller profile. So that helps as well.

Then within high frequency, what does the competitive landscape look like?

What is the landscape of the high frequency? Just competitive landscape. Right now, we have a patent protection that basically protects us from any other entrance. We have several years on that, and we're working on other technologies to extend those patents.

And the other thing to point out is when you think about Nevro and the why, it opened up a new addressable market for Globus. If you were a candidate for back surgery and you don't want back surgery, you had this option to do an implantable pain device. If you were someone who's already had back surgery and doesn't want another back surgery, but you may need one, this is another option for those patients. But it also wasn't just the business that we saw. To Brian's point on the patents, the patent portfolio we saw as opportunities for us to develop in other areas. We've talked a little bit about cranial. You know, right now our robot is available for a cranial application, but we don't have that ability to drive disposables and pull through. We see there might be opportunities with high frequency to have us enter into the cranial space. But, you know, we haven't given a ton of detail on that. But the point that I want you to leave with is that it wasn't just for the business, that it was when we acquired it.

And then looking at 27, I believe consensus is modeling 6% top-line growth. I do believe that's a good place to be entering 27. and what would have to occur if you guys could be high single digits?

So we're not guiding specifically right now on next year, but I would say over the long term we want to be a mid to high single digits grower. As I think about going into next year, the drivers to me are really three areas. Our spine business, both U.S. and international. Our U.S. business, we want to see continue to drive growth. We see the ability to drive more competitive recruiting. International, over the long term, we would think that that is a low double-digit grower. We'd like to see a return of growth to Nevro and then really see the benefits of our enabling tech business, not to only mention trauma is continuing to grow, but trauma is still a fairly small number. But I see that business having the ability to grow exponentially as we look ahead. You know, overall, I feel very positive about where the business is. Once we get some more of these new products out the door, I think we're set up really well to look into the future.

Okay. And then looking at the P&L, just tailwinds, headwinds on gross margin, operating margin.

So when we announced the Nuba deal a couple years ago, we talked about returning to a mid-70s gross profit profile. I think you've seen the last eight or nine quarters of continued sequential improvements in our gross margins. We still stand by our statement of getting to that mid-70s range, which, you know, 72 to 75 is where I see this business landing. How are we getting that? Through additional insourcing activities. The opportunities that we saw with NuVasive when we announced the deal are still there. We're working through the insourcing activities there. Nevro, that business already had a fairly high gross margin, high 60s. I still see a little bit of an opportunity for incremental gross margin expansion there. And as you continue to drive that growth, you're going to get operating leverage. But the thing I do want to call out is we're going to continue to invest in our business from an R&D perspective. I spoke on the last earnings call about a specific increase in headcount related to our product development teams. We see that, you know, taking shape here in the third quarter and into the fourth quarter and as well as next year. You know, as you think about the business growing and gaining profitability and getting leverage, I wouldn't just say that that's going to drop to the bottom line. You know, where we said we wanted to be a mid-70s gross profit business and mid-30s EBITDA, I think we're pretty much there at this point. We want to then take those funds and find ways to reinvest.

Correct. And outside of internal investment, how are you thinking about capital allocation?

Capital allocation right now, internal investment, I would say, is number one. Share repurchases, second, and then thirdly, M&A. I would think that right now where we're at, any type of M&A would have to be focused in areas where we might not have business. When I think about musculoskeletal, complementary pieces of technology, or as I think going into the future, taking a little bit of a slant, a little bit more towards med tech, when I think about all the things that we have coming along from an internal development standpoint. But any deal that we do would be more of a tuck-in in nature at this point. I really, you know, after several years of doing deals, I think that, you know, there's a lot of product development going on that puts us right on the forefront of getting some of these products out. I want to get these out and drive some of our organic growth that we see coming. We think we have a lot of stuff that's in the hopper that will be exciting to talk about as time passes.

Sounds great. With the remaining time, I'll leave it to you guys for any closing remarks.

Yeah, I think overall, I think Globus is really well positioned. The business, we still have a strong balance sheet. I don't see that changing. That allows us to be flexible. We want We want to continue to invest in internal R&D as we continue to grow, you know, over the next five years. I say, you know, we candidly at some point, we want to double in size again. To do that, there's organic growth opportunities, but there will also be some timed M&A that will occur. We want to continue to fill out our bag along our trauma business as well as our joints business. Not a lot to talk about there yet, but there's a lot of irons in the fire that really position us well as we move forward. We're still very much a spine company, but we're also working to become a more diversified musculoskeletal player. and musculoskeletal medtech player. The idea of improving outcomes is a key focus of ours. The 70 to 95%, David and I have been talking about that at length and Higgs Boson, we're very excited about bringing that into our repertoire of products because we think that really can help differentiate us as the market continues to grow and adapt as time passes. That's great, thank you for being here.